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Management of ERP Management of ERP solutionssolutions
Samo Bobek
Simona Sternad
ICMIS 2010Allahabad, India
OutlineOutline
ERP solutions and their implementation
CSF in ERP implementations
In general
According to different methodologies
According to distinct phases of implementation process
Management issues of ERP implementations
Conclusion
ERP solutionsERP solutions
Enterprise resource planning (ERP) solutions are defined as
customizable, standard application software which includes
integrated business solutions for the core processes and the
main administrative functions.
ERP can be also defined as comprehensive package software
solutions seek to integrate the complete range of a business
processes and functions in order to present a holistic view of
the business from a single information and IT architecture.
ERP solutions consist of more modules and they support
business processes on operative level in an organization.
Like many new fields in information systems, ERP solutions
have many synonyms, such as:
integrated standard software packages,
enterprise systems,
enterprise wide systems,
integrated vendor systems etc.
ERP solutions allow organizations to replace their existing
information systems, with a single integrated system.
ERP solutions implementation ERP solutions implementation
A project phase model (Parr and Shanks) divides ERP implementation into three major phases:
1. planning phase includes the selection of an ERP system,
assembly of a steering committee, determination of high-level
project scope and implementation approach, selection of a
project team and resource determination.
2. project phase has five sub-phases: setting up, reengineering,
design, configuration and testing, and installation.
3. enhancement phase may extend over several years and
includes the stages of system repair, extension and
transformation, and continuous improvement.
Shields also talks about three stages of ERP implementation projects:
1. first stage consists of pre-project activities including initial
commitment.
2. second stage deals with specific project implementation
activities: start, manage, analyze, configure, test, change,
support, prepare and go-life.
3. third stage is focused on post-project activities, which are as
important as the first two phases, since we have to perform
various activities for further improvement of the adopted system.
Bancroft, Seip and Sprengel defined a five phases model:
1. Focus Phase is essentially a planning phase, which includes
activities: setting up of the steering committee, selection and
structuring of the project team, development of the projects
guiding principles and creation of a project plan.
2. As-Is Phase includes analysis of current business processes in
the light of the ERP functions, installation of the ERP package,
mapping of business processes on to the ERP functions and
training of the project team.
3. To-Be phase consists of high-level design, detailed design,
followed by interactive prototyping.
3. Construction and Testing Phase consists of development of a
comprehensive configuration, its testing with real data
4. Implementation Phase itself consists of building networks,
installing desktops and managing user training and providing
support.
ERP solutions implementation ERP solutions implementation strategies strategies
ERP solutions are implemented according to following scenarios: big bang approach,
phased approach,
parallel approach,
process approach
hybrid approach
Strategy chosen depends on organization size/complexity, industry characteristics, implementation goals, resources provided and expected timeframe
ERP solutions implementation ERP solutions implementation methodologiesmethodologies
ERP vendors have developed their own methodologies that best
fit their package. Because of the leading market shares of SAP
and Microsoft Dynamics NAV ERP packages, we have focused
ourselves in their respective implementation methodologies:
SAP implementation methodology – ASAP
MS Dynamics implementation methodology - SureStep
SAP solution implementation SAP solution implementation methodologymethodology
Accelerated SAP (ASAP) implementation methodology promotes
project management principles, team members, business
process consultants, external consultants and technical areas
support. ASAP methodology provides roadmap, toolkit, service,
and support and training.
The roadmap is a detailed project plan that describes all
activities throughout the implementation which are organized in
five phases:
1. Project Preparation consists of enhancing organizational
readiness and preparation for the project.
2. Business Blueprint deals with the scope which is narrowed to fit
the industry-specific processes to reflect the future vision of a
business.
3. Realization means that the business blueprint becomes reality -
the system is configured and tested.
4. Final Preparation consists of refining the system, preparing go-
life plan, end-user training, knowledge transfer, system
administration, data migration, final testing and fine tuning
5. Go-live and Support - final checks should be done before and
after taking-off and also procedures and measurements are
developed to review the benefits of an ongoing basis.
Microsoft Dynamics solutions Microsoft Dynamics solutions implementation methodologyimplementation methodology
Microsoft has developed its own methodology for implementing
Microsoft Dynamics ERP packages (NAV and AX), called
Microsoft Dynamics SureStep.
SureStep methodology helps in reducing risk by making
implementation projects simpler, faster and more manageable as
it unifies project management terminology, tools, roles and
streamlines processes and communication among the project
stakeholders.
Implementation phases according to SureStep are:
Diagnostics deals with gathering information in order to prepare
an adequate implementation proposal (detailed requirements and
gap/fit analysis).
Analysis Phase defines functional requirements.
Design Phase includes the design of both the overall solution
configuration and the design of specific customizations and
integrations needed to cover business requirements; it also
includes mapping and designing of data migration processes
Development Phase includes the actual development of
customizations, integrations and data migration processes that
are set through design specifications.
Deployment Phase includes all activities related to final system
and testing, training of end users, and the actual cut-over to the
new production environment.
Operation Phase deals with the transition and on-going support
Success of ERP implementation Success of ERP implementation projectsprojects
The implementation of an ERP system is a huge, strategic and
complex project involving considerable risks reflected in the time,
scope, and cost of project implementation.
Because of the complexity of ERP implementation it is critical not
to focus exclusively on the implementation methodology steps
but also to create conditions in which the chosen solution can be
implemented in the expected time, scope, and budget. This
means that organizations should be aware of critical success
factors (CSFs) in ERP implementation.
Organizations have to know which factors are critical and
important for them
according to the implementation methodology used by the ERP
vendor and
within distinct implementation phases.
Critical success factors in ERP Critical success factors in ERP implementation projectsimplementation projects
Over the past several years considerable research has been published on CSFs in ERP implementation. Fourteen CSFs were mentioned by majority of authors:
Top management support and involvementTop management support and involvement
Top management support is critical because top managers have
to make fast and effective decisions, resolve conflicts, bring
everyone to the same thinking to promote company-wide
acceptance of the project, and build co-operation among the
diverse groups in the organization.
Clear goals, objectives and scopeClear goals, objectives and scope
Clearly defined business and strategic objectives are in the most
cases very important critical factor. Having a clearly defined
vision and mission, and a formulation of the right policies and
strategies, serves as the blueprint for organizational success.
Clear goals and objectives should be specific and operational
and have to indicate the general directions of the project. They
should also provide a clear link between business goals and IS
strategy. Well-defined objectives help to keep the project
constantly focused, and are essential for analyzing and
measuring success.
Project team competence and organizationProject team competence and organization
Selecting and motivating the right employees to participate in
implementation processes is critical for the implementation’s
success. Teams must consist of the right mix of business
analysts, technical experts, and users from within the
organization and consultants from external companies, chosen
for their skills, past accomplishments, reputations, and flexibility.
User training and educationUser training and education
A lack of user training and understanding of how ERP systems
work appears to be major reason for many problems and failures
in ERP implementation. Several authors highlight cases of
inadequate training. If the employees do not understand how a
system works, they will invent their own processes using the
parts of the system they are able to manipulate. The full benefits
of ERP is not realized until end users are using the new system
properly.
Business process reengineeringBusiness process reengineering
Despite ERP systems are essentially developed as instruments
for improving business processes such as manufacturing,
purchasing, or distribution and are built around best practices in
specific industries, they may not necessarily fit an organization’s
business. ERP implementation is a matter of transforming
business practices. So implementing an ERP system involves
reengineering the existing business processes to fit best
business practices.
Change managementChange management
The existing organizational structure and processes found in
most companies are not compatible with the structure, tools, and
types of information provided by ERP systems. These changes
needed may significantly affect organizational structures,
policies, processes, and employees and can cause resistance,
confusion, redundancies, and errors if not managed effectively.
Many ERP implementations fail to achieve expected benefits in
part because companies underestimate the effort involved in
change management.
Effective communicationEffective communication
The importance of communication across different business
functions and departments is well known in the information
technology implementation literature, because communication
has a significant impact on the process by minimizing possible
user resistance. Communication has to cover the scope,
objectives, and tasks of an ERP implementation project.
Effective communication is required in project teams and within
the organization (i.e. weekly team meetings, postings on the
company intranet etc.)
User involvementUser involvement
Because ERP systems cross functional and departmental
boundaries, cooperation and involvement of all people in the
organization are essential. Because there is always threat to
users’ perceptions of control over their work involving users in
defining organizational information system needs can decrease
their resistance to ERP systems. Users often perceive their role
in ERP implementation as central in their judgment about new
system.
Data analysis and conversionData analysis and conversion
The quality of pre-existing data and information systems is very
important factor in successful ERP implementation. If problems
with data are not solved in old legacy systems they will hardly
be solved during ERP implementation and therefore the quality
of implemented system will be questionable. Data problems
could even rise because modules in ERP solution are
interlinked.
ConsultantsConsultants
The success of a project depends strongly on the capabilities of
the consultants because the consultants are the only one with in-
depth knowledge of the software. Consultants provide a very
valuable service by filling gaps, providing expertise, and thinking
out-the-box. They are specialized and can usually work faster
and more efficiently than others involved in the implementation
process.
Project managementProject management
ERP projects are huge, complex, and risky, so effective project
management is crucial. Approximately 90% of ERP
implementations are late or over-budget, which may be due to
poor cost and schedule estimations or changes in project scope.
Project championProject champion
Project champions or sponsors are individuals who have a clear
understanding of what is going on; they are very critical to
implementation success. Champions ideally should have
experience in previous implementation efforts to manage
conflicts that arise before and after implementation. Project
champions perform the crucial functions of transformational
leadership, facilitation, and marketing the project to the users.
Project champions play a critical role in the acceptance of the
technology and he/she is usually at senior management level so
they have the authority to make substantial organisational
changes occur.
Architecture choice (package selection)Architecture choice (package selection)
All ERP packages have limited capabilities. Some packages are
more suited for larger companies while others fit smaller firms
better. Some packages have become a “de facto” standard in
certain industry. Some have a stronger presence in certain parts
of the world. To increase the probability of success, management
must choose software that most closely fits its requirements.
Minimal customizationMinimal customization
Most companies significantly underestimate the effort required
for code modification. Vendor’s code should be used as much as
possible, even if this means sacrificing functionality, so upgrades
from release to release can be done easily. Therefore, every
modification request should be carefully evaluated and
approved, or rejected, after considering all the options.
Research of CSF in SAP and MS Research of CSF in SAP and MS Dynamics NAV projectsDynamics NAV projects
To research the importance of ERP implementation CSF’s according to project phases, and to analyze the importance of distinct CSFs for different methodologies, we conducted an empirical study. We used a web questionnaire, which was mailed to companies that implemented an ERP solution in the recent past. Our sample consisted of companies which implemented SAP (54 companies), or MS Dynamics NAV (117 companies). Forty-five questionnaires were returned for a return rate of 26.3 percent.
Finding concerning the use of SAP Finding concerning the use of SAP and MS Dynamics NAV and MS Dynamics NAV
Because SAP solution is known as ERP solution for large
companies and Microsoft Dynamics NAV solution is known as
ERP solution for SMEs, it has been checked if there is
correlation between them in our data. Therefore it has been
found that there is positive relationship between solution and
size of the company (r=.644, p<0.01).
Research questionnaireResearch questionnaire
Respondents have been asked to rank fifteen of the most
important CSFs of ERP implementation according to sources on
ERP implementations; the rank should correspond to the
importance of distinct CSF to their organization.
CFS effective communication has been divided on two CSFs, the
first is communication between a project team and an
organization and the second is communication within a project.
ERP implementation CSF in SAP projectsERP implementation CSF in SAP projects
In companies in our sample where SAP solution were implemented with the ASAP methodology, CSFs were ranked as follows:
ERP implementation CSF in MS ERP implementation CSF in MS Dynamics NAV projectsDynamics NAV projects
In companies in our sample where MS Dynamics NAV solution were implemented with the SureStep methodology, CSFs were ranked as follows:
Comparing ERP implementation CSF in Comparing ERP implementation CSF in SAP and MS Dynamics NAV projectsSAP and MS Dynamics NAV projects
Our research confirmed that the importance of CSF is different within SAP implementation projects and within MS Dynamics NAV implementation projects.
SureStep ASAP
MXN Rangen MXS Ranges
Clear goals, objectives, scope, and planning 3.45 1 1.70 1Top management support and involvement 5.64 2 3.40 2Project champion 9.40 10 7.20 4Project team 6.18 3 4.00 3Project management 10.70 13 9.33 12Communication inside project team 7.55 6 8.22 8Communication between project team and organization 8.73 9 7.30 5
Consultants 10.10 12 8.00 7User involvement 6.82 4 7.44 6User training and education 7.09 5 8.78 10Change management 11.20 14 11.10 14Business process reengineering 8.27 7 8.33 9Architecture choice 12.80 15 13.30 15Minimal customization 9.80 11 8.80 11Data analysis and conversion 8.64 8 9.89 13MXN, MXS = represents arithmetic mean
Comparing ERP implementation CSF in Comparing ERP implementation CSF in SAP and MS Dynamics NAV projectsSAP and MS Dynamics NAV projects
Findings show that the most important CSFs corresponding to both methodologies are: clear goals, objectives, scope, and planning; top management support and involvement; and, project team.
The most noticeable differences in rankings is with the importance of the project champion. The project champion is ranked fourth for the ASAP methodology and tenth for the SureStep methodology.
A big difference in ranking between implementation methodologies also appeared for user training and education. This factor ranked fifth for MS Dynamics NAV and tenth for SAP.
Comparing ERP implementation CSF in Comparing ERP implementation CSF in different implementation phasesdifferent implementation phases
Arithmetic mean for CSF’s regarding phases of SureStep methodology and ASAP methodology
NAV I II III IV V VI SAP I II III IV V VIR1 3.40 3.13 3.00 2.67 2.80 2.93 R1 3.69 3.00 3.00 2.31 2.46 2.31R2 3.00 2.33 2.07 1.93 2.13 2.07 R2 3.31 2.54 1.54 1.62 2.77 2.38R3 2.40 2.33 1.80 2.07 2.00 1.93 R3 3.15 2.54 1.85 1.85 2.69 2.23R4 2.73 2.93 2.93 2.87 2.87 2.60 R4 1.77 3.23 3.31 3.38 3.46 3.00R5 2.53 2.47 2.53 2.20 2.20 2.00 R5 1.92 2.69 2.31 2.69 3.00 2.00R6 2.87 3.07 2.93 2.93 2.87 2.80 R6 1.77 3.54 2.92 3.00 3.31 2.92R7 2.67 3.13 2.53 3.07 2.93 3.07 R7 2.08 3.31 2.46 2.85 2.92 2.85R8 2.13 2.40 2.67 2.47 2.47 2.13 R8 2.08 2.92 3.31 2.46 2.85 2.23R9 2.33 2.47 2.33 3.00 3.00 2.73 R9 1.46 2.85 1.92 2.92 2.69 2.92R10 1.93 2.27 2.47 2.60 2.53 3.00 R10 1.46 1.69 1.85 2.69 2.77 3.08R11 1.87 2.07 1.93 2.00 2.27 2.33 R11 1.62 1.92 2.31 2.77 2.62 3.31R12 2.73 2.87 2.80 2.60 2.87 2.60 R12 2.54 3.15 2.23 2.46 2.62 2.54R13 2.73 2.07 2.13 2.00 1.93 1.73 R13 1.69 1.77 2.15 1.69 1.62 1.85R14 2.67 2.53 2.47 2.27 2.13 1.87 R14 2.31 2.77 2.62 2.23 2.23 2.15R15 2.53 2.33 2.47 2.53 2.80 2.13 R15 1.08 1.23 2.23 2.77 2.46 1.69
Comparing ERP implementation CSF in Comparing ERP implementation CSF in different implementation phasesdifferent implementation phases
If we compare the ranking of CSFs for those from companies which implemented SAP with the ASAP methodology and from companies which implemented Microsoft Dynamics NAV with SureStep methodology we see some similarities but each methodology has its own importance of CSF.
Project champion and change management are not as critical in any phase in Microsoft Dynamics NAV projects and also that architecture choice is not critical in any phase in SAP projects.
Clear goals, objective, and scope, project team, communication and business process reengineering are critical factors in every phase of ERP implementation Microsoft Dynamics NAV projects.
In last three phases of Microsoft Dynamics NAV projects critical factors are also user involvement and user training and education.
Very important factor is clear goals, objectives scope and planning in first three phases of SAP projects.
In all phases, except the while selecting the ERP solution, critical factors are the project team competence and organization and communication inside the project team in SAP projects.
Management issues of ERP Management issues of ERP implementation projects – reasons for implementation projects – reasons for
ERPERP
Answers to the question “ What are the reasons of a company to decide to implement ERP solution” were:
better access to data,
modernization of existing business processes with ERP solution,
single data entry,
incompatibility of previous information systems,
integrity of a solution, demand of owners,
better reports,
adaptability and flexibility of ERP solution
Management issues of ERP Management issues of ERP implementation projects – why particular implementation projects – why particular
ERP solution was chosenERP solution was chosen
Answers to the question “Why a particular ERP solution has been chosen” were:
integrity of a selected ERP solution,
efficiency and stability operation of an ERP solution,
support of an ERP vendor,
cost and price of an ERP solution,
and requirement of an owner or other business partners
(customers, vendors etc.).
Management issues of ERP Management issues of ERP implementation projects – implementation projects –
implementation scenario usedimplementation scenario used
Use of implementation scenarios (strategies) was as follows:
50 percent companies answered Big Bang Approach,
14.3 percent companies answered Phased Approach,
14.3 percent companies answered Approach,
2.4 percent companies answered Process Approach and
19 percent companies answered Hybrid Approach.
Management issues of ERP Management issues of ERP implementation projects – satisfaction implementation projects – satisfaction
with ERP functionalitywith ERP functionality
Answers to the question “In what extent chosen ERP solution
covers business processes of a company” were:
14.3 percent respondent answered completely,
73.8 percent answered almost completely
11.9 percent answered partly
Nobody answer badly.
Management issues of ERP Management issues of ERP implementation projects – changes in implementation projects – changes in
business practice because of ERP business practice because of ERP implementationimplementation
Answers to the question “In what extent business processes in companies which implemented ERP solutions have to be adapted to business processes of ERP solution chosen” were:
No one respond entirely
20.1 percent of companies respond say largely,
76.7 percent respond partly and
2.3 percent respond no adaptation.
These results have been expected because the fact that if
coverage between existing business processes and business
processes of ERP solution is under 60 percent, it is not
recommend to choose and implement a particular ERP solution.
Management issues of ERP Management issues of ERP implementation projects – duration of implementation projects – duration of
implementation implementation
Most durations of ERP implementations reported were between 3 month and one year (66.7 percent).
Months SAP NAV Answer PercentUnder 3 1 3 4 9.53 - 6 2 8 10 23.86 9 4 3 7 16.7 9 – 12 3 4 7 16.7More than 12 11 3 14 33.3Total 21 21 42 100
There is a positive moderate relationship between the time of
implementation and the size of a company (r = .464 p<0.01) and also
between time of implementation and the ERP solution (r=.426 p<0.01).
Management issues of ERP Management issues of ERP implementation projects – was ERP implementation projects – was ERP
implemented according to planed time implemented according to planed time
33.3% of implementations lasted longer than they have been
planned and the reasons for that were:
changing scope of implementation,
weak knowledge about functionality of ERP solutions,
passive collaboration within project team during the analyze
phase,
key users have been overloaded with daily tasks so they do not
have time to participate in the implementation process
Management issues of ERP Management issues of ERP implementation projects – changes in implementation projects – changes in
ERP functionality during the ERP functionality during the implementation implementation
Answers to the question “Wheatear scope of expected functionality has changed during the implementation” were:
14.6 percent answered small decrease according to planned functionality,
36.6 percent answered no changes – planned functionality implemented,
29.3 percent answered small increase according to planned functionality
19.5 percent answered big increase according to planned functionality.
nobody answered big decrease according to planned functionality
Major reasons reported for changing the functionality have been:
“during an implementation we found out new functionalities of the
ERP solution for which it would be foolish to release it out of the
project”;
“after analyzing and defining business processes key users
understand importance of the ERP solution better and that was
leading to the increase in scope”,
“bad analysis and defining processes, and bad cooperation with
top management”.
Management issues of ERP Management issues of ERP implementation projects – changes in implementation projects – changes in
costs costs
Answers to the question “Wheatear the costs of implementation
changed according to planned costs” were:
nobody answered much smaller than planned.
4.9 percent have answered a little smaller than planned,
26.8 percent have answered the same as planned,
46.3 percent have answered a little bigger than planned
22 percent have chosen much bigger than has been planned.
Major reasons reported for raising of costs were:
bigger scope of functionality than planned,
more consultants’ hours,
bigger number of interfaces with other information systems as
planned,
persistence at adaptation of ERP solutions to existent processes
and procedures.
Management issues of ERP Management issues of ERP implementation projects – major implementation projects – major unexpected problems during the unexpected problems during the
implementation implementation
To the question “If any big problems have occurred during an
implementation process”:
31.7 percent have answered yes and
68.3 percent have answered no.
Most often problems reported were:
user resistance for change,
bad training and bad user manuals,
unsuitable consultants, bad computer literacy,
poorly included middle management,
the solution has not been tested enough by users,
bad defining of business processes etc.
ConclusionConclusion
Organizations should select the ERP package which:
fits organization,
provides industry functionality,
supports changing business environment,
easily integrates with other information systems in organizations,
vendor implementation support
have availability of implementation accelerators such as training
materials, user procedures, help text, process models etc.
good support after implementation
To be successful with EPR implementation a company has to
take in account the:
implementation strategy,
implementation method (implementation process) and
implementation CSFs.
A lot of ERP implementations are failures, because companies
which bought ERP solutions think that ERP implementation is a
technological and not management issue. Failures in ERP
implementation showed that management issues are
underestimated.